Air India ceases to be a state after disinvestment or its instrumentality under Article 12: SC

Air India Limited (AIL) is no longer a state or its instrument under Article 12 of the Constitution after disinvestment and acquisition by Tata Group in January 2022 and no case of alleged violation of fundamental rights will be made against it, the Supreme Court has ruled on May 16th.

The Supreme Court dismissed the appeals against a Bombay High Court judgment dated September 20, 2022, which had dismissed four petitions filed by some employees of AIL alleging stagnation in pay and non-promotion of employees, late payment of wage adjustment arrears, among others .

The top court found that the petitions before the Supreme Court alleged violation of Articles 14 (equality before the law), 16 (equal opportunities in matters relating to public employment) and 21 (protection of life and personal liberty) of the Constitution became.

A bench of Justices BR Gavai and Sandeep Mehta observed that the Supreme Court had dismissed the pleas on the ground that the pleas were untenable due to privatization of AIL.

It is undisputed that the Indian government has retained its 100 percent stake in Talace India Pvt. Ltd. no longer had administrative control or deep control over the private company and therefore “the company could no longer have been treated as a state after its disinvestment following the takeover by the private company”. “Therefore, after disinvestment, the respondent No. 3 (AIL) was undoubtedly no longer a State or its institution within the meaning of Article 12 of the Constitution of India,” it said.

The court said once AIL ceased to fall within the definition of state under Article 12 of the Constitution, it could no longer have been subject to the jurisdiction of the court under Article 226 of the Constitution.

“The defendant no.3 [AIL], the former state-owned airline was taken over by the private company Talace India Pvt. accepted. Ltd. is undoubtedly not performing any public duty as it has simply taken over the Government Company Air India Limited for the purpose of commercial business and therefore no suit is enforceable against the respondent No. 1. 3 [AIL],” it said.

The Supreme Court noted that at the time of filing the pleas in the Supreme Court, AIL was a government entity and the causes of action were decided only after considerable delay as the company had by then been disinvested and taken over by a private player.

Since AIL had been disinvested and had assumed the character of a private entity with no public function, the Supreme Court could not have exercised extraordinary jurisdiction to grant an order to such a private entity.

“The division bench [of the high court] has taken care to protect the appellants' rights to remedy and therefore it cannot be said that the appellants were unsuitable in this case. “It is simply that the appellants would have to approach another forum to seek their remedy,” the court said in its judgment.

“Uncertainly, the delay in disposing of the suits may have been a reason for proceeding with and maintaining the suits as the forum, d to the private defendant, which had changed hands in the meantime,” it said.

The bench stated that the Supreme Court's view of denying fair compensation to the appellants and directing them to approach the appropriate forum for raising their grievances was the only fair and permissible view.

“Following the above discussion, we see no reason to take a different stand from that taken by the Bench of the Bombay High Court by maintaining the preliminary objection qua viability of the pleas preferred and rejected by the appellants “The same holds true untenable,” the top court said, dismissing the appeals.

The bench noted that on October 8, 2021, the Center announced that it had accepted the offer of Talace India Pvt. has accepted. Ltd. acquire their 100% shares in AIL.

It further noted that on January 27, 2022, pursuant to the agreement with Talace India Pvt. signed share purchase agreement. Ltd. 100% of the Indian government's shares in AIL were bought by the private company and AIL was privatized.

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Sybil Alvarez

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